Although it remains about 20% overvalued, the housing market in Quebec appears headed for a soft landing, according to New York City-based Fitch Ratings.

Home prices in the province are continuing to weaken amid lagging economic growth, the rating agency notes in a report published Monday. “A soft landing is now in progress that should continue to see home prices drift slightly downward over the next year,” the report states.

Although the market is still significantly overvalued, according to Fitch, the report forecasts prices trending slightly downward, but avoiding a more significant crash. Citing data from Teranet, the report notes that home prices in Quebec are now 4% below their peak in 2012 in real terms. Prices are expected to increase modestly throughout the summer due to seasonal pressure, but report indicates that prices have been on a downward trajectory, with negative year-over-year returns in every month since June 2013. By contrast, national prices have not declined on a year-over-year basis since the downturn in 2009, and are up 8% since 2012, it notes.

Fitch has viewed the Quebec housing market as overvalued for some time, the report notes, with its estimated overvaluation peaking at 27% in 2012. Since then, negative real price trends and positive economic growth have reduced overvaluation to approximately 20%, according to the report, and, Fitch continues to see a soft landing for the market.

“Quebec home prices are exhibiting signs of gradual moderation and decline,” the report states, adding that it expects prices to trend modestly downward over the next several years. “Risks may be elevated if the broader Canadian economy falters. However, limited energy exposure in Quebec and a weakening Canadian dollar which should improve balance of trade should limit significant downside,” the report concludes.